Could 3, 2020 (Thomson StreetEvents) — Edited Transcript of Alten SA earnings convention name or presentation Friday, April 24, 2020 at 10:59:00am GMT

Alten S.A. – Deputy CEO & COO

* Gregory Okay. Ramirez

So welcome to the convention, Alten, concerning the turnover for the primary quarter 2020.

Now I will give the ground to Mr. Bruno Benoliel, the Deputy Basic Supervisor. You’ve the ground, sir.

Bruno Benoliel, Alten S.A. – Deputy CEO & COO [2]

Sure, good afternoon. So good afternoon to all of you. Thanks for taking part in that convention name concerning the exercise of the primary quarter 2020. That first quarter was affected by the start of the well being disaster in China in February, and in Europe mid-March, and within the U.S. That unprecedented disaster worse than the one in 2008 has led to suspensions of tasks. Typically it was large in some areas, however not so large in different areas.

The figures that I will current now are an proof of that, however they do not make it attainable to attract conclusions concerning the developments per sectors of exercise or geographies. After the lockdown that needed to be managed in China with a restricted affect on the group exercise. The turnover was EUR 32 million in 2019 in China. The lockdown measures in Europe have led to the suspensions of a number of industries after which in a while within the U.S.

The turnover for the primary quarter of 2020 is EUR 690.1 million, and it’s progressing by 7% versus the primary quarter in 2019. It was EUR 643.Three million on the time. In France, the exercise is steady. Outdoors France, it is progressing by 13.2%. Acquisitions for EUR 20.2 million have contributed as much as 3.3% of the group progress. The precise fee have contributed to 0.4% of the expansion of the quarter.

Consequently, in like-for-like exercise and fixed change charges, the expansion is 4% — at 0.4% in France due to the switch of a associated firm on the finish of 2019 that we’ve got transferred and the turnover was EUR 2.7 million of turnover. The natural progress is 0.4% in France and 6.8% exterior France.

The — there have been 0 — a further 0.73 working days, 0.6 in France. And this has — of working days, this has contributed to an enchancment. There shall be 123 working days for the primary quarter versus — properly, a further of 0.Eight working days. And within the second semester, we’re going to have 50 — 127 working days. Will probably be a further 0.7 working days in the course of the second semester, it will likely be half a day extra day versus 2019.

The primary quarter began consistent with final 12 months in France and overseas. The exercise had a progress fee that was extra standardized, like we defined within the assembly in January. As early as January 2020, recruitments have made it attainable to compensate for the lead, and we had 32,800 engineers in the beginning of February. That was a further 300.

March — in March, we had a brutal interruption and we had 32,760 engineers, so we have been at 37,200 on the finish of 2019. There have been 32,750 engineers. So we’ve got built-in somewhat firm in Japan with 115 folks. In France, the engineers have been lowered by 131 folks, and outdoors of France, the workers has elevated by 236 folks. The expansion of the workers was due principally within the U.Okay. and Italy and in North America.

As you’ll be able to think about, the priority since — at March will not be recruiting however to maintain the exercise occurring. Nearly all Alten engineers can work from their properties if their buyer base makes it attainable. However that is fairly totally different, relying on prospects and geographical areas. Many shoppers within the trade principally have stopped their tasks. They’ve halted them or they will resize them. Some prospects have determined to shut the location and cease all actions in the course of the time frame. And dealing from properties was — has not been attainable even for work-package work as a result of they’d — they did not have the workers mandatory in a extra pragmatic method.

And with the intention to anticipate the longer term disaster with the drop of the gross sales, many shoppers have determined to freeze a major share of their tasks in order that they might make a list and resolve on the finish of the lockdown what could be the precedence tasks that they might proceed, what could be the tasks that they might proceed by decreasing the scale of the groups and what could be the tasks that they might cease. At this stage, it’s totally tough to know what the longer term shall be as a result of we do not know what their tasks are, particularly in trade that has been hardly hit just like the automotive sector and the civil aviation.

Since mid-March, in France, in Sweden, in Germany, within the U.Okay. and in Southern Europe, and now within the U.S., many shoppers are taking selections. Trying on the bench, we’re confronted with this determination each day. Throughout the first quarter, the exercise fee went down by 2 factors versus 91.8% final 12 months. And in March, the exercise fee was 88%, which is 12% of — into contract.

The start of the well being disaster has hampered by 1/Three the outcomes for Q1 for the primary quarter. Now we’re confronted with totally different conditions relying on the geographical areas, the sectors of actions.

I would like to speak concerning the state of affairs per geographical space, realizing that the developments for the primary quarter can’t be extrapolated to the second quarter. Now if I — we will estimate some information for the primary semester, however we’ve got to be extraordinarily cautious as a result of the state of affairs is altering in a short time. And we’ve got no clear visibility for the entire quarter for a major share of our prospects.

In France in Q1, the exercise was steady, plus 0.4%. Suspension of tasks in March has penalized the expansion by 2%. So it ought to have been round 3%. The sectors which have grown the place Aerospace, plus 4%; Protection & Safety, plus 10%; vitality, plus 10%; the nuclear trade, plus 16%; the rail and naval, plus 19%; and telecom, plus 4%. Total, in the course of the first quarter, 2/Three of Alten exercise was rising.

The second quarter shall be very totally different. The well being disaster with very brutal repercussions in France has led to many venture interruptions, principally in ASD automotive and within the tertiary sector in Amadeus, relying instantly from air transportation, however not on the — many shoppers, all industries included, have closed the websites who haven’t made it attainable to work from our properties. The intercontract fee ought to, in France, be at 30% in April after which go down, relying on the resuming of the exercise with our prospects. We do not know but that what would be the restoration plans as a result of all industrial methods are being revisited, and we consider that the decline of the exercise could be within the neighborhood of 15% in France for the primary semester, 18% shall be as a result of disaster.

On the worldwide degree, the exercise can be being affected by the well being disaster, however in a distinct method relying on nations. No Q1 information may be extrapolated on Q2. After which to present you country-per-country an general image of the state of affairs at this stage and the time to attempt to defend ourselves within the second quarter, in North America, the exercise has grown up by 25%, 16% for natural progress. The ForEx was important, it was optimistic by 3.3%.

All sectors within the U.S. have been rising in the course of the first quarter. Probably the most dynamic sectors like in 2019 have been the automotive sector, plus 10%; vitality, plus 50%; life sciences, plus 25%; telecom, plus 11%; finance treasury exercise, plus 5%. The well being disaster has affected North America solely in the course of the second quarter with the development of the intercontract fee that was very sturdy within the automotive and heavy weight within the first place the place we had 500 folks as a result of many tasks have been stopped.

Power, the vitality sector, principally the gasoline was affected for the explanations that and the administration and consulting supply observe, [PNO] and agile consulting. We’ve got 350 folks, which have been deployed principally within the vitality sector and treasury finance. The intercontract fee within the U.S. might attain 20% in the course of the second quarter, which means that the U.S. exercise may very well be steady for the primary semester, whereas we did anticipate a progress greater than 10%.

In Germany, the exercise has declined by 6.3%. On a like-for-like foundation, Germany was already being affected by the disaster, which weighted by 3% on the decline of the exercise within the automotive sector, 40% of the exercise. The exercise declined by 10%, 15% for tools makers. And for the aeronautic, it is barely rising in the course of the first semester. However in Q2, like in France and for a similar causes, many tasks have been halted.

Let me recall that the automotive sector and the aeronautic interim accounts for 77% of the turnover in Germany. We might have 22% for the intercontract fee, and that is the rationale why the decline that’s anticipated could be within the neighborhood of 20% in Germany, 15% could be as a result of disaster.

In Scandinavia, the exercise on a like-for-like foundation is declining by 4% throughout Q1. In Finland, it is rising by 3%, which accounts for 20% of the Scandinavian turnover. However Finland can be being affected throughout Q2 by the disaster. And the very fact needs to be declining by 13% for Q2, which for Finland could be an exercise declining by 5%. For the primary time in Sweden, 80% — making up 80% of the Scandinavian turnover. The automotive sector and heavy weight accounting for 52% of the turnover has stopped a majority of their tasks as early as mid-March, and their exercise is declining by 5%, 0.2% as a result of disaster. Second quarter with an intercontract fee akin to Germany and the decline needs to be round 20% in Sweden as properly, and 15% could be as a result of disaster.

In Spain, the exercise is rising by 6.8% general, however 1.5% are on a like-for-like foundation. However the well being disaster began earlier in February, however some strict lockdown measures have been put in place to the exception of the Safety & Protection sector declining by 20% and automotive declining by 20% as properly. Each sectors accounting for 20% of the Spanish turnover. These sectors have stopped their tasks like in every single place else in Europe.

All the opposite sectors or actions have continued. They’ve pursued their tasks working from dwelling, and the exercise has continued kind of usually. All the opposite sectors are rising.

Throughout Q2, the tasks that have been stopped due to the disaster could be — will intensify, and this may result in a rise of the intercontract charges. Throughout the first semester, we consider that in Spain, the exercise shall be declining by 5%, so in a average method. Within the Benelux, the exercise is rising at — rising by 5%. In Belgium, it’s steady, even when the performances are totally different from sector, and there needs to be a decline by 7% in the course of the first semester.

Within the Netherlands, exercise has grown by 14%, 4% in the course of the first semester to the exception of electronics and semiconductors accounting for 1/Four of the exercise within the Netherlands.

All sectors are rising. The affect of the disaster shall be felt in the course of the second quarter with an intercontract fee that ought to attain 10%. Consequently, the exercise needs to be steady in the course of the first semester. That is why we thought we’d have a 3% progress.

In Italy, regardless of the top disaster that has been brutal and began in February, the exercise was performed principally from dwelling and it has continued regardless of the lockdown. All sectors are rising, even within the automotive sector, plus 11%, even SAD, plus 20%, and the natural progress has reached 15%. Nonetheless, anticipating a slowing down of their exercise, prospects have lowered in a major method the funds for the second quarter. Subsequently, we consider there shall be a powerful slowing down throughout Q2. And in Italy, the expansion needs to be 8% for the primary semester as a consequence to the slowing down in Q2 and never the anticipated 14%.

In Asia Pacific, the scope has continued to develop, plus 32% and plus 13% in natural progress. The expansion of the area was pushed by India as a result of native actions have continued to develop. They make EUR 11 million of turnover in the course of the first semester, with an 18% progress. In India, the exercise goes to decelerate throughout Q2 due to the lockdown measures.

China, EUR 5 million of turnover in the course of the first semester is declining by 13%, and that is not shocking as a result of the exercise has stopped between January and starting of March. They have not been again to regular and the automotive gross sales are nonetheless being strongly impacted in China.

And eventually, the U.Okay., the expansion was very rigorous, because of an distinctive 2019, nice — with a really sturdy progress in aeronautics, plus 66%; automotive, plus 24%; nuclear, plus 100%; the rail — however there could be a powerful affect within the U.Okay. in Q2. We consider there shall be a powerful decline. We consider the decline within the automotive and aeronautics sector shall be within the neighborhood of 20% throughout Q2. So we’re nonetheless going to have a 5% progress, however the disaster will value us round 13%.

Sectors of actions. So the primary quarter has confirmed the developments of the newest quarter in 2019, however the disaster has modified all prospects per sector of actions. The automotive is declining by 5%. Throughout Q1, the decline was strengthened by the start of the well being disaster. And it is fairly heterogeneous relying on automotive producers. Some are experiencing some progress and others are declining. However the well being disaster goes to have a significant affect on the exercise and in a sustainable method, and that is going to worsen in 2020 with a attainable bounce again in 2021 that we hope will occur. The rail/naval continues to be strongly rising, plus 16% for the place the disaster has slowed down the exercise in Q2. However the order books are full, and hopefully, the restoration ought to occur in the beginning of 2021.

For the aeronautics, we’ve got 16.1% of the turnover. The expansion has been 3% in homogeneous method between the area exercise, the tools makers and plane makers. However well being disaster has had a powerful affect on airline firms. And that is going to have a sustainable affect on the aeronautics sector. Many tasks have been stopped, the plane manufacturing will go down and the intercontract fee tasks won’t be renewed, make it attainable to fulfill the brand new demand. So many tasks shall be stopped or lowered. And subsequently, the visibility that we might have may be very restricted.

Now Protection & Safety, 4.5% of the turnover. They’re strongly rising. Even when there may be an affect throughout Q2, that sector ought to bounce again in a short time. Power accounts for 11.5% of the Alten turnover. Oil and gasoline, 6% of the turnover. They’ve a plus 25% progress, however they are going to be impacted by the lower of crude oil.

Nuclear, 2% of the turnover. The expansion continues to be fairly sustained and the exercise needs to be preserved.

Life sciences, 7.5% of the turnover, they’re rising by 11%. And on the quick time period, the exercise is being impacted by the disaster, however there needs to be a bounce again.

Telecommunications, [6.6%] of the turnover. They’re barely rising 6.5%, to the exception of Ericsson in Sweden. The expansion is coming from operators, the 5G migration and the networks which can be being overly used due to people who find themselves working from properties. This could proceed after the disaster. Telecommunication, media exercise is declining consistent with what was taking place in 2019, with a major decline at Amadeus, which goes to worsen in the course of the Q2.

Amadeus, I do not know if that is one thing that’s recognized. So I am not going to present any determine, however the exercise is declining in a major method due to the interruption of the airline exercise. So Q2 digital multimedia, we do anticipate a decline that may be greater than 10%.

Finance and treasury sector, the turnover accounts for 18.4% of Alten exercise, and it’s rising by 3% and it is principally pushed by the banking exercise. Now for exterior progress, we’ve got consolidated on January 1, an organization the place we held a minority shareholding, at 40% in Japan. We went as much as 100%. We had a name on that firm. It is an organization with 115 workers, and their profitability is kind of low, decrease than 5%.

The Chinese language-Japanese firm that we acquired on the finish of the quarter, the closing came about on the finish of final 12 months. This firm is specialised on safety and software program improvement. There are 400 folks. Clients are in Japan, however a lot of the consultants are positioned in China. That firm made EUR 18 million of turnover in 2019, and their margin was barely decrease than 10%

For 2020, I would not dare to make any forecast, not for the second semester, however what we’ve got seen — that we have seen that the IT actions have been extra protected than different actions while you have a look at the breakdown of the turnover per sector of exercise. That is the rationale why nations in Southern Europe are doing higher as a result of our exercise is kind of centered in trade with a major share in automotive and aerospace exercise in France and in additionally Northern Europe. We have used a number of — we have taken a number of measures when attainable to attempt to preserve our margins as a lot as attainable as a result of the intercontract fee that we’ve got to be confronted with are unprecedented, and it could be very pricey if governments couldn’t pay for a major share of it.

Now so far as the exercise for the primary semester is anxious, we do consider there shall be a decline of 9% on a like-for-like foundation. To the most effective of our data right now, that it is inconceivable to make any forecast for the second semester as a result of a few of our prospects are — can’t give us any forecasts for his or her actions.

I will provide the flooring so you’ll be able to ask any questions that you just may need.

In some industries, in mild of the difficult state of affairs that our prospects are confronted with, some negotiations are happening about costs. And so we do have a context that’s extra difficult than the one we had in 2008 as a result of it is not as a lot targeting one sector of exercise, and it is way more brutal with penalties that we’ve got to handle each day.

Having stated that, we’ll handle the state of affairs. Alten is a wholesome firm. We have no debt. We have needed to handle disaster prior to now. And so we’re managing the present disaster. And hopefully, as early as subsequent summer time or most likely in September, there shall be a rebound.

Now might we open the ground for members?

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Questions and Solutions

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Operator [1]

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(Operator Directions) So we’ve got first query from Laurent Daure.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [2]

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Sure. The truth is, I had Three questions. The Airbus account, might you please inform us — I do know it is the most important account, however might you inform us what the state of affairs was final 12 months? And what would be the state of affairs for the primary semester?

The second level is on the best way you handle your headcount. What would be the group technique? Are you envisaging social plans or what shall be — or are you ready after the top of the lockdown? I assume that you have taken some measures already, and also you do have some potential financial savings. Now for the M&A coverage, in view of the truth that it is tough to make any forecast, can — do you assume we might have offers on the finish of the 12 months?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [3]

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Now for the Airbus account, it accounts 10% of the turnover — of the group turnover. Taking into consideration that for that account, on Q2, we do count on to see a discount of 40% of the exercise. We have had extra in April, even when the month will not be over as a result of we’ve got real-time reporting of intercontract. So we’re at 45% for April, however that is going to go down as a result of after the lockdown actions will begin once more. So perhaps 40% is somewhat bit excessive, however let’s be cautious. We might go right down to 10%, 15% for intercontract charges in June, however I consider we’re going to stay greater than that as a result of among the tasks won’t begin once more or they won’t begin with the identical dimension of the groups that they’d earlier than the disaster.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [4]

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So for the market share?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [5]

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No, it is not particular to Alten. We’re most likely the #1 so far as engineering is anxious with Airbus. They’re making a exact stock of all their tasks which can be underway.

Now what I stated concerning the first semester for the developments or the natural progress forecast, we have made an train, which was to attempt to per buyer per venture what the exercise was going to be, and we have taken this into consideration.

Now the turnout had began to say no on the finish of March. In France, we have had lots of of individuals leaving the corporate, however these folks had resigned earlier than. So we’re going to consolidate on the finish of April on the premise of what companies are reporting what would be the resignations on the finish of April. That is how we’re going to have the ability to measure the turnover. Even when the turnover is declining, the turnover is reflecting the previous for the time being. So we’ve got to have a look at the habits of engineers because the starting of the lockdown to see what number of resignations we’ve got acquired on the finish of April.

I haven’t got the determine at this stage. I do not consider that we’re going to go right down to Zero as a result of there are all the time folks leaving. In 2008, simply to present you an order of magnitude, the worst of the disaster, I believe we had been down to eight% to 9%, which continues to be fairly excessive for the account. The measures that we took concerning the workers, concerning the headcount.

For recruiting, like for everyone else, what are we going to do? There have been labor contracts that had been signed. So we have postpone them, however we’re not recruiting anyone for the time being. Until there are some, clearly, wants for a beginning venture. Let’s not overlook that our prospects have lowered their exercise in a strongly method, and subsequently, the industrial exercise has additionally declined. So we organized our conferences over the cellphone or by video, however the variety of industrial conferences have been lowered in a major method. That is going to result in a discount of tasks. And subsequently, right now, the recruiting insurance policies are on maintain. Whether or not we must always have a [softer] plan. At this stage, we’re utilizing furlough wherever we will to protect the abilities as a lot as attainable. And we’ll modify — we have used furlough measures, and we’ll see.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [6]

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The query is concerning the intercontracts. Properly, so typically, you will have furloughed workers since you get a profit from the federal government. It isn’t the case in every single place in all nations. So what could be the financial savings in your margin?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [7]

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I haven’t got the precise figures. I will have the determine, the precise determine on the finish of April.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [8]

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For March?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [9]

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So it takes a while to place the request, get the approval, et cetera. So it is going to happen in April. And the precept is similar in all nations. We make a request in volumes, in hours, or we multiply the — for instance, 5 days over Three days. It is a proportion. After which on the finish of the month, on the premise of the fact of the tasks, we declare that persons are furloughed. It may very well be a partial or a full course of. We have requested for furloughed measures within the U.Okay. and Romania, in Sweden, in Germany. We simply filed for it in Belgium, in France, for the primary nations, in Spain as properly. Finland has additionally requested for the chance to do it. Even Italy, the place the intercontract fee is kind of low. So it is making use of to most nations the place we do have an issue with the exercise.

The one nation the place there are not any furloughed workers is within the U.S. As a result of within the U.S., when you do not want folks, you lay them off. However we’ve got determined to not do it as a result of when you recruit folks, you prepare them, we have determined to not dismiss them, however we’ll see in a month’s time, within the U.S., if we’ve got to regulate if tasks which have been stopped, like for Volvo, Ford, if they don’t begin once more. However a few of them will begin once more. Nevertheless it’s too early on to take any selections at this stage.

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Laurent Daure, Kepler Cheuvreux, Analysis Division – Head of IT Software program and Companies Analysis [10]

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Now furlough, relying on nations, you’ll compensate totally or not? In France, for instance, the federal government can pay as much as 70% of the gross wage, which general implies that folks will get 80% of their web wage.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [11]

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There’s a Syntec conference, which is saying that we must always pay as much as 90% or 100% of the wage. The extra value will not be being paid by the federal government, clearly, in all nations on this planet. Furlough will give proper to paid holidays, which aren’t being paid by the federal government. So even when there’s furlough, it’s not going to neutralize the price of the worker, and it is not going to do it in a unified method in all nations. So furlough is an effective factor as a result of it makes it attainable to carry and to not take hasty selections as a result of our know-how is our engineers. Nevertheless it has penalties on the margin. Not solely there may be some residual value, however the misplaced turnover will not be going to generate any margins. And that is true for the entire trade.

The margin that we’re shedding on our turnover is a margin on tasks. So they’re much greater than the 30% that we’ve got as a result of this gross margin that we’ve got consists of intercontract or all the things that’s mandatory for manufacturing.

Now the M&A coverage. We had a lot of information that have been signed, however had not been closed. And so we’ve got frozen them in lieu of the state of affairs. However we’re taking a look at different information as a result of firms shall be bought at a lesser value right now. However the issue is that it is difficult to evaluate an asset as a result of we do not know what the corporate’s exercise shall be in 2020 and what the margin shall be in 2020. There won’t be so many individuals promoting as a result of it is an atypical 12 months. And the query shall be, if in case of any deal, we must agree on a down fee that’s the lowest attainable linked to the foreseeable exercise in 2020. So I do not see any attainable offers earlier than Q3, and earnouts will most likely be greater as a result of they are going to be correlated to the rebounds in 2021, 2022. Nevertheless it may very well be a chance to make acquisitions in favorable situations that we could not have performed in different circumstances. So we’ve got not frozen our M&A coverage. We’re nonetheless wanting and analyzing targets.

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Operator [12]

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We do have one other query from Gregory Ramirez.

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Gregory Okay. Ramirez, Bryan Garnier & Co Ltd, Analysis Division – Analyst [13]

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Bruno, I would like to return again to value and to not the variable share for bills exterior the top rely bills. What’s the flexibility that you’ve applied because the starting of the disaster? What could be the share of variable value in operational bills? I assume that it’s totally tough to make any budgetary forecast and that there are various attainable eventualities. However what may very well be any lending state of affairs when it comes to operational margin on the premise of the decline on the natural progress in 2020? For instance, if you find yourself at 10% of natural progress, you can have 4% to five% of operational margin, for instance?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [14]

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Properly, I can’t talk concerning the 12 months. We began to make simulations. assumptions for S2, whereas there are various of them, to make use of possibilities, it does not imply a lot. So actually, we can’t give any steerage concerning the second semester. Taking into consideration that the uncertainty is what will be the extent of exercise within the automotive sector and the aeronautic sectors which can be essential sectors for us. As a result of as I used to be saying, our prospects didn’t know what would be the tasks and what would be the quantity of investments that shall be made for the top of the 12 months. So it is a huge uncertainty.

And concerning Laurent’s query, so far as the top rely is anxious, that is additionally why we’ve got no certainty for the variable value at Alten. If I used to be somewhat bit provocative, I’d say, we haven’t any. As soon as any individual is within the intercontract, it turns into a hard and fast value offshore ADC. They’re a hard and fast value as a result of it is captive. All prices are proportionate to the exercise. Engineers, clearly, as a result of relying on the variety of actions with a continuing and normal fee of exercise, which is 92%, 93%. These are proportional prices, however they don’t seem to be variable value. As a result of to the exception of some subcontractors that we might resolve to cease working with if the exercise stops. And this accounts for five% of the conductive revenue and a few of them are linked to some tasks.

So we’re not going to cease working with them. As a result of once we name upon subcontractors, it is to not have variable value, it is as a result of we do not have the competence in-house. So to the exception of that side of issues, in actuality, there are usually not that many variable prices. The variable prices are the bonuses of managers, all features included. So we must modify the construction if mandatory, relying on the extent of exercise in 2020 — shall be what we contemplate to be the usual degree of exercise for 2020. If we contemplate that 2020 is sort of a clean 12 months, relying on the tasks that we are going to have, we must have a look at to dimension the corporate. Clearly talking, the associated fee have been sized for EUR 2.5 billion. Clearly talking, we’re not going to make that determine, we could have an natural progress discount. And as I used to be telling Laurent, the lack of the turnover may be very costly as a result of we’re shedding the entire margin.

Now how is it going to translate in operational margin? Will probably be minus 5% in the course of the first semester. Now for the second semester, I don’t know. Properly, actually, for the primary semester, it’s going to rely upon Could and June. So it is actually an advanced train. We do have totally different eventualities, however it’s an advanced train. Subsequently, we’re not speaking on the margin. Normally, I have a tendency to present you some totally different ranges. However we do have eventualities that we have constructed exchanging — on the premise of the change between the operational managers and the shoppers. However the prospects has no visibility in any respect, even on how they will get well, how the exercise goes to be resumed. The well being plan must be outlined. A few of them haven’t outlined them. We all know that the — we’re going to get out of the lockdown in a progressive method. That shall be an on-a-zone case. So it may be extra difficult in mild of what has occurred with the social companions even when all people may be very strict concerning the well being measures to be put in place.

So actually, that is to let you know that I am actually sorry, however I can’t provide you with a really exact reply. However 5% will not be absurd. It may very well be 6% or 4.2% or 6.5%. The sensitivity, we’re speaking about scores of thousands and thousands of euros, and we do not have that for S2. So EUR 100 million of turnover. So far as the gross margin on a venture is anxious, it will likely be about EUR 35 million.

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Gregory Okay. Ramirez, Bryan Garnier & Co Ltd, Analysis Division – Analyst [15]

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So far as buyer’s habits is anxious, I assume that you’re having discussions about fee — onerous to increase fee deadlines?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [16]

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We do have a few of these discussions, however they don’t seem to be crucial one. The truth is, buyer, they do not ship out the orders, and that is how they handle their fee deadline. In our trade, we’ve got a really longer fee occasions. Properly, that might deteriorate. We have not seen it up to now. We do get cash on due time. So the invoices for 2019 and 2020 are being paid. Now the discussions that we’re having with them are associated to different subjects, costs. Clearly talking, prospects are getting again to us telling us that their monetary state of affairs may be very difficult and their money state of affairs may be very difficult. So that they’re asking the entire trade to make important efforts on costs. Some are doing it on a one-off foundation, however some wish to assessment all of the referencing and all the costs. So that is going to present rise to difficult discussions.

Some prospects are asking us to present them the time to get well. Some are asking us to scale back our costs by 30%, others are asking us to scale back by 5% to 7% sooner or later. So actually, we see all the things. I believe that in case you have been to speak to competitors, they might say the identical factor. Typically additionally, when persons are working from their properties and the engineers are usually not on web site, some prospects are saying, we contemplate that productiveness can’t be the identical. So if it can’t be the identical we contemplate that 10%, 15% of productiveness has been misplaced. So we’re asking for a discount of costs by 10% to 20%. We’re not saying sure. However simply to let you know that it is a difficult state of affairs.

Properly, it is not shocking in view of the context. Issues will get again to regular, however that is the present context we live for the time being.

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Operator [17]

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(Operator Directions) We’ve got a query from Derric Marcon from Societe Basic. So we’ll take one other query from Stefan Slowinski from Exane BNP.

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Stefan Julien Henri Slowinski, Exane BNP Paribas, Analysis Division – Analysis Analyst [18]

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Bruno, I had 2 questions. The primary one was about China. I believe you stated that there was no restoration in China for the time being. And we’ve got been listening to because the finish of March that issues are selecting up in China, so I would like to listen to what’s your opinion about China?

And the second query, once we’re beginning to consider the reopening in Germany and presumably in France. I do know it is early on however perhaps for subsequent 12 months, do you assume that tasks will change? How might tasks change in our prospects? Now will the kind of tasks would change and what issues for purchasers versus the tasks we had earlier than the disaster?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [19]

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So far as China is anxious, the exercise has picked up in China progressively beginning in March. So all people was in a lockdown. Our engineers have labored from their properties for 1.5 months. And so they’ve been allowed to return to the location, both on the prospects’ or on our web site progressively. In China, usually, our exercise fee is about 95%, 96%. 3%, 4% of intercontract. Intercontract has gone up in the course of the lockdown as a result of some prospects cease tasks within the automotive sector, notably. So we went as much as 30%, 35% of intercontract charges and all this has been solved, and now the speed is about 10%. The exercise has began once more, not utterly, however for the automotive sector, we nonetheless have a excessive fee.

Now so far as tasks are involved. As soon as the exercise resumes in France, in Germany and Sweden in every single place, the questions shall be, what’s the quantity of investments that prospects will resolve on the finish of 2020, starting of 2021 since their revenue within the automotive sector and the aeronautics sector will decline in a major method. So what they’re doing for the time being, they’re making stock of their tasks. So they may resolve which tasks will obtain the precedence. If they’d a venture that was performed as much as 80%, they need to end it. In any other case, they may lose the funding. However then, they may resolve both to proceed — hopefully, most of them will proceed, however among the tasks shall be stopped. And a few tasks shall be resized as a result of a few of our prospects are telling us that we must always begin fascinated with decreasing the crew for the remainder of the venture, and they’re asking us to scale back the specs.

Some tasks may very well be revisited. For instance, I am fascinated with engineering, manufacturing actions at Airbus. A few of them have been taking a look at the right way to meet line pace, and Airbus stated that they have been going to scale back their manufacturing. So Airbus had a month-to-month fee as much as 120, they will go right down to 40. So the query is the right way to save as a result of they’ll produce the 40 for the time being.

After which a few of our prospects are conducting a research about what could be the curiosity of continuous a venture or not. And we do rely upon their conclusions. But when there’s a discount of revenue in any sector, a discount of revenue will give rise to a discount of funds, even when they’re R&D budgets as a result of they’re pushed by the highest line.

In fact, tasks about standardization, et cetera, besides if the European Union decides to go backward. Usually, these tasks ought to proceed as a result of life won’t cease. The continuing revolution within the automotive sector will proceed even when it will likely be postponed by 1 or 2 years. That is why we consider the exercise will actually resume in 2021, 2022. However we consider within the automotive sector, the disaster shall be long-lasting and the funding degree shall be lowered.

Now what would be the proportion, we can’t converse on behalf of our prospects, however it’s going to occur.

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Operator [20]

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One other query for Derric Marcon with Societe Basic.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [21]

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The primary query is concerning the use fee, you stated it went right down to 88% in March. You gave us developments for Q2 per nation. May you inform us about the place you stand for the primary 2 weeks of April or starting of Q2, so we might have an thought?

And my second query, I would like to return again to Laurent’s query. If you end up speaking about intercontract charges which can be very excessive, I assume it is exterior the furlough. May you give us an thought of the variety of folks that you just consider may very well be furloughed? I assume that you’ve negotiated with the Ministry of Labor already, the variety of furloughed folks out of those 3,000 folks. As a result of if we have a look at the glass half full, to generate a 5% margin implies that it’s best to get some heads that do compensate for the lack of turnover as a result of with 30% of intercontract means a giant drop of the margin.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [22]

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Sure, that is fairly certain. Now for Q2, we took some assumptions for intercontract charges. That features furlough as a result of it is not cumulative. People who find themselves furloughed, they’re accounted for as being furloughed, however we contemplate that they’re exterior tasks. Nevertheless it’s a great factor to ask the query as a result of it is not cumulative.

So in March, we had an advanced month. For the final 2 weeks, the intercontract fee went up 12%, 13%. The intercontract degree in April is at about 25% on the group degree. And it’s going to go down in Could and June, most likely at somewhat bit lower than 20%. However that is a part of our simulations as a result of concretely talking, we do not know what would be the tempo for resuming tasks and what’s going to occur in June.

So when we’ve got people who find themselves not working — now furlough is to compensate for the lack of exercise in view of the financial context. It does not work precisely the identical method in all nations although the precept is similar. In some nations, the place — when persons are not working and there may be furlough, there’s a attainable furlough like in Germany. Now if you wish to apply for furlough, in Germany, it is a lot less complicated than in France, which isn’t shocking. The truth is, we will have a look at what is occurring in Europe for furlough and French paperwork is essentially the most environment friendly one, and that is not likely shocking, is it?

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [23]

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No. They made some efforts to simplify issues.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [24]

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Properly, it is true for small-sized firms. As a result of I do know a lot of folks and former workers from ALTEN have began their very own firms. So small-sized firms that are in a tough state of affairs, they get an settlement for furlough in a short time. Large firms — for giant firms, it is extra difficult.

Now to return again to the way it works. In some nations, when you meet the situations for having the proper to furlough you could show that there’s a lot of exercise with the interruptions of tasks, et cetera. It isn’t open bucket, that in case you are entitled to furlough that you’ll get the profit both instantly, like in Belgium, or it’s the firm that’s going to advance the cash after which it could be reimbursed by the federal government. So in some nations, it is 70% of the associated fee or 60% of the associated fee, it actually is determined by nations. In a number of nations, when persons are furloughed, we proceed to pay software program prices. In some nations, it is not the case. In some instances, you need to give some extra wage. You’ve all conditions, all attainable state of affairs. However in all nations the place we apply for furlough, in case you beat the factors, you may get a sure or a no reply. And if it is a sure, you’re entitled to it. So we filed for furlough in all nations the place we’ve got a discount of exercise.

Intercontracts as a result of lack of exercise are being compensated by furlough. In France, the federal government is vigilant. They need to keep away from facilities. And subsequently, we’ve got filed a request for furlough as a result of in volumes, it’s in France that we’ve got essentially the most — the best variety of workers that may very well be furloughed workers. Once we speak about 4,000 engineers, in case you have a look at Alten and its first subsidiaries, a few of them are utterly unemployed and others are furloughed. We ask for the variety of hours on the premise of the volumes. And actually, we’ll declare on the finish of the month on the premise of actuality. We’re being given the inexperienced mild for the quantity of hours, however then we’ve got to justify that. And in France, we contemplate [and this is the normal] that the federal government mustn’t pay for structural intercontract. So we’re not going to use for furlough for people who find themselves in intercontract or standardized intercontract. We do it for people who find themselves in intercontract due to the disaster. So clearly talking, if the intercontract fee is 25%, and normally, we’re at 6%, we’re going to apply for the distinction. And we needs to be ready to — we needs to be able to justifying this. After which we’re having discussions with the administration, both we get an specific settlement from the administration or we’ve got implicit settlement from the administration as a result of they did not have the time to cope with it, and they’re going to validate after 24 hours, then we will come and test.

We do have questions and solutions. We’ve got to reply a few of their questions with the intention to show that we’re in a state of affairs whereby we have to apply for furlough.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [25]

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Now what I used to be attempting to grasp, with all these discussions, have you ever performed — have you ever acquired all of the approvals? Have you ever budgeted your intercontract threat as a result of disaster in the course of the first semester? And in case you make so, what’s the — so what’s the state of affairs in France for the time being?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [26]

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We’ve got filed in all European nations, and I do not consider there was any downside. In France, we’ve got filed for furlough in all subsidiaries. Every part has gone by means of an specific or an implicit settlement for Alten as a — I can’t provide the figures, however we’re speaking about half of the top rely for France.

And right here, we’re exchanging questions and solutions. The administration is asking us a lot of questions. Have you ever put in place some measures to protect the exercise? Have you ever organized the truth that folks might work from their properties? They’re asking reliable questions, and we’ve got to reply them. Nevertheless it’s not as clean as in different environments.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [27]

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Properly, 50% are being coated. So 50% for France are being coated. However what you’ve got performed already and the remaining 50% are a part of the Q&A session with the administration?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [28]

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Sure, that is proper.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [29]

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We’re solely speaking concerning the productive workers? Have you ever utilized for nonproductive workers?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [30]

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Sure, we’ve got put a request for nonproductive workers as properly, not as a lot, relying on features. We’ve got reviewed features one after the other. For instance, the folks answerable for recruiting, they aren’t overwhelmed for the time being. So we have requested for furlough for them, not whole furlough however we’ve got thought-about that almost all of them have been furloughed.

For the finance folks, it is not the identical factor. Some industrial managers, it is not the case. They’re working nights and days. So it actually is determined by your perform. Individuals organizing occasions, they’re furloughed. Even when some occasions should be organized for September, however industrial seminars in Could, company conferences, for apparent causes, they’ve all been canceled. So we’ve got checked out all features, one thing that the France administration is asking. They requested us to enter element for the organizational chart. For firms of our dimension, it won’t be the case, for smaller firms, however they ask — they have a look at all positions within the organizational chart.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [31]

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One final query, if I’ll. If you happen to have a look at what will occur after the disaster, the truth that we’ve got organized telework out of your properties and from the client, is that going to make us take into consideration how we might ship merchandise to prospects even after the disaster? Like engineers which can be nonetheless working for Amadeus, they aren’t going to work for Amadeus for a very long time. Do you assume you can reorganize the truth that they might work from their properties on different tasks in France since distant work is changing into normal? Or is it going to be nonetheless very difficult to make use of that workforce in a distant method?

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [32]

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So what we’re taking a look at, for the time being, concretely talking, individuals who have been working for Amadeus, Amadeus goes to cease their tasks. We’ll — we’re taking a look at how we might use the competencies in different sectors of actions in reference to IT. They won’t essentially be primarily based in Sophia Antipolis. The reply is sure, we will get organized having folks work remotely. After they’re engaged on our facet, they’re already working remotely with prospects as a result of some steering committees are being held on a weekly or month-to-month foundation. So we might envisage having distant work proceed. And actually, it is attention-grabbing to see that it really works fairly properly. Now we do not know if it’s going to proceed to work properly. As a result of with the intention to work remotely, you might want to have the proper situations. Not all people has all of the situations met as a result of typically you hear that the youngsters are within the again. Nevertheless it saves transportation time. If folks know the right way to get organized and if they are often autonomous working from their properties, we might envisage on the long term to have much less premises, for instance. As a result of right now, we’ve got a variety of sq. meters to place with prospects’ necessities as a result of they wished their work packages to be positioned subsequent to the edges, so they might have smoother human exchanges. We might have much less premises, we might have folks rotate on websites, work organizations whereby folks would go to a web site for Three days after which they might stay at dwelling for two days. And we would have to arrange these sort of plans when we’ve got folks engaged on safety.

For instance, we’ve got a lot of open area workplaces. And there, we do not have the two meter distance — safety distance. So I do not consider folks will be capable of work from their properties with out by no means going to the workplace as a result of there’s skilled and social hyperlink that you might want to preserve. At Alten after just a few weeks working from their dwelling, persons are coming again to the workplace, they usually’re very completely satisfied to return to (inaudible). However that is going to pressure us to have a distinct group. We have seen video conferences with 60 members. That is one thing that we had by no means envisaged prior to now. Even 6 months in the past, we would not have considered it and it really works properly.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [33]

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Properly, I am not listening to folks slapping their youngsters. I am listening to folks enjoying the piano. This morning, I had a convention — video convention and I heard any individual slapping their youngsters.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [34]

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Sure, the primary impediment is the truth that faculties are closed.

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Derric Marcon, Societe Generale Cross Asset Analysis – Fairness Analyst [35]

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Sure, it is difficult.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [36]

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As a result of you might want to have the proper situations in place. We — our engineers are fairly younger, they’re kind of 30 years outdated. So they simply began their work lives. They do not all have a giant residence the place they’ll isolate themselves. We’ve got to consider the sensible situations.

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Operator [37]

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Thanks. So the ground is yours for the conclusion.

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Bruno Benoliel, Alten S.A. – Deputy CEO & COO [38]

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Thanks very a lot. Thanks to all of you for attending that phone assembly, which is kind of distinctive. I believe in 2008, we had an advanced 12 months. However the subjects are fairly totally different from those that we have been speaking about. Hopefully, we’ve got given you an image of what the market seemed like. Throughout the publication in July, I will be extra exact on the S1 margin as a result of to make any forecast at this stage may be very tough. It should rely upon the turnover in Could and June and the turnover sensitivity may be very excessive. In July, I am going to provide you with a exact image of what we might count on when it comes to margin for the primary semester. We’ll see whether or not the extent of exercise has declined by kind of 9%. We would have a pleasant shock. However to be sincere with you, we consider that we have been fairly goal in our forecast. And hopefully, we’ll have a transparent imaginative and prescient of what would be the exercise within the second semester. And hopefully, issues will clear up. So I want you a pleasant weekend and see you quickly. Thanks. Bye-bye.

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Operator [39]

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The convention is over. Thanks in your attendance.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]



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